Supreme Administrative Court decision
The Supreme Administrative Court has held that the annulment of a Competition Authority decision does not constitute a ruling that all of the authority's actions during the relevant administrative procedure were illegal. According to the court, a claim for damages in respect of fines already paid (and retained by state institutions during litigation) will not be accepted if they are based solely on the annulment of the decision. The applicant must prove that the authority exceeded its discretion in the exercise of its powers and infringed administrative law provisions.
In 2005 the authority imposed a fine of Lit32 million (approximately €9.2 million) on the largest oil refinery in the Baltic states. It found that ORLEN Lietuva (previously Mazeikiu nafta) had abused its dominant position by applying unfair pricing practices. The company paid the fine and simultaneously appealed the decision. In 2008 the Supreme Administrative Court annulled the prohibition decision and referred the case for additional investigation. In 2010 the authority issued a new decision, which was subsequently also appealed.
In 2008, after the initial decision had been annulled, the company lodged a separate action for damages, claiming that the authority had illegally retained the company's resources for three years (ie, during the litigation). It argued that the annulment of the decision indicated that the authority had acted illegally. In 2009 the court of first instance rejected the claim. Nevertheless, proceedings were renewed in 2010. In July 2011 the Supreme Administrative Court adopted its final decision.
Supreme Administrative Court decision
The court emphasised that the annulment of an act of an administrative authority - in this case, the Competition Authority - does not indicate that all of the authority's related actions were illegal. The court explained that in order to determine whether an administrative authority has acted illegally, it is necessary to conduct a thorough analysis of the circumstances in which the administrative act was annulled.
The court held that in some cases, administrative authorities can infringe certain laws by failing to act according to their discretion; such authorities may exceed the limits of their discretion in evaluating certain facts and questions of law. In this case the court examined whether the Competition Authority can exceed such limits in issuing a prohibition decision. The court found that it was obvious from the annulment decision that the authority had not exceeded its discretion, as the decision had been annulled because insufficient reasons had been provided. Only an obvious lack of reasoning for such a decision would constitute clear and serious infringement of the law and raise the issue of damages being suffered. Moreover, in view of the highly complex legal and economic context of the case, the fact that the authority did not investigate certain factual circumstances and did not present a sufficient basis for its conclusions could not be interpreted as an infringement of its powers.
The decision has precedential value: it is the first judgment of a damages claim against Lithuania's competition regulator and establishes a legal standard for such claims. On the court's analysis, such a claim cannot succeed unless the applicant proves that the authority entirely failed to provide reasons for a prohibition decision; in itself, mere insufficient reasoning does not demonstrate that the authority acted illegally.
While leaving some scope for damages claims against the authority, the court has made it more difficult for potential applicants to bring such actions by not clarifying the standard of proof. The wording of a possible standard - 'lack of reasoning', as opposed to 'insufficient reasoning' - is too ambiguous, leaving it unclear when or whether it will be possible to prove that the authority exceeded its discretion.
For further information on this topic please contact Marius Juonys or Lina Barauskaite at LAWIN Lideika Petrauskas Valiūnas ir partneriai by telephone (+370 5 268 1888), fax (+370 5 212 5591) or email ([email protected] or [email protected]).